The rule of law – inefficiency and corruption in the export of timber logs to Asia

By Janette Bulkan

In the article ‘The rule of law? – not in the forest sector of Guyana’ published by Stabroek News’ In the Diaspora on Monday 16 January 2012, I outlined the simple ways by which some traders export timber logs illegally.  In today’s article, I show some of the inefficiencies in the semi-computerised systems used by the Guyana Forestry Commission (GFC) and Guyana Revenue Authority (GRA), including its Customs and Trade Administration (C&TA).  I show also some of the ‘small piece’ payments which lubricate the flow of documents for timber export through the government bureaucracy.  And I mention the alleged forest offences for which the Guyana Forestry Commission (GFC) is imposing undocumented administrative penalties disproportionate to the nature of the alleged offences.

Guyana scores poorly in most international indices on quality of governance including those on ease of doing business. The tradition of numerous government licences to start and operate a business goes back to the post-Independence Burnham regime.

Rationalization of the licensing requirements has been slow during the years of PPP government from 1992.  ‘An entrepreneur can expect to go through 8 procedures requiring an average of 34 working days in total in order to launch a business  . . . To enforce a contract, some 36 procedures are required with an expected timeline of 581 days to complete the process’ (see www.doingbusiness.org/Docu-ments/CountryProfiles/GUY.pdf).  The Global Competitiveness Report 2009-2010 by the World Economic Forum included among the most problematic factors for Guyana: tax rates, tax regulations, inefficient government bureaucracy; see www.weforum.org/pdf/GCR09/ GCR20092010fullreport.pdf. And The Heri-tage Foundation’s 2010 Index of Economic Freedom noted a weak rule of law, corruption in all areas of government, oversized government, an inefficient bureaucracy; see www.heritage.org/Index/Country/Guyana.  Meanwhile, the tightening of US import rules against post-9/11 terrorism, against drugs and against illegally-produced timber has caused the Guyana Revenue Authority (GRA) to add more controls to the Customs administration, including a scanning device in the port area (‘Container scanner in operation’, Stabroek News news item, 01 June 2011).

Some of the inefficiencies in the bureaucracy seem to stem from a government failure to use a systems approach.  In order to obtain an export certificate from the GFC HQ, an exporter (or broker on behalf of a nominal exporter) needs: a timber marketing (grading) certificate with the grader’s signature, brand and date; a timber inspection certificate with the GFC timber inspector’s signature, brand and date; presentation of the load list with the relevant 9-character GFC timber tag numbers (there may be hundreds of these numbers in any one consignment), removal pass, commercial invoice and bill of lading; confirmation from GFC that relevant royalties and the export commission (levy) have been paid.

Separate signatures from 2 out of 6 named GFC senior staff must be obtained.  At present, this process involves four separate forms.  Why not use just one form?  Instead of manual completion and hand-carrying from office to office, why not use an on-line system with electronic signatures?  If only 6 GFC HQ staff can sign, why not have a publicly-visible rota so that at least 2 out of the 6 are available at any one time at HQ? – instead of the exporter having to wait for the HQ staff to appear in their offices, perhaps for days.

The GRA is likewise only partly computerized, with multiple forms and repetitive entry of data into different GRA and C&TA databases in different offices at different locations.  Mistakes by GRA or C&TA staff in data entry cause delays at the expense of the exporter.  The only partial nature of the automation of process provides opportunity for graft, in that delays can be reduced or prevented by payment to the government staff of a ‘small piece’.  As in the GFC, some steps in the GRA/C&TA process require signatures of 2 out of 4 senior staff, who may not be available when needed.  Informants indicated that 4 to 8 ‘small pieces’ may be needed to expedite processing of documents for a single consignment, totalling around US$ 110 per consignment.  Bribery is proportionately cheaper for larger numbers of shipping containers included in a single consignment.

Storage costs are of course less if Customs clearance can lead directly to ship loading.  The certificate from container scanning is only valid for 72 hours, so if the ship arrival is delayed or if loading is delayed, then scanning should be repeated.  It is unclear why the scanner cannot operate on a 24/7 basis, especially as the scan must be booked for date/time in advance.  The GRA Commissioner said that ‘it is impractical for the GRA to scan the nearly 1,000 containers that are exported from Guyana on a yearly basis’ (SN 01 June 2011).  However, as the scan and report per container takes only 20 minutes, 1000 containers could be scanned in only 333 hours or less than 8 weeks of 46-hour weeks.  What is this million-US-dollar scanner doing for the rest of the year?  Year-round operation would help to reduce demurrage charges when ship departures are delayed by late loading.

Why do exporters need to carry bundles of paper documents between GRA and C&TA offices?  And why does the process take up to two weeks (‘Exporter experiencing inordinate delays’, Stabroek News, 22 June 2011).  All exporters have at least laptops and internet connections.  Why not have an entirely electronic processing system at least for containerized cargo, with almost all the data entry carried out by the exporter and the GRA and C&TA only verifying and extracting statistical information?  The GFC claims to have a standard operating procedure for exports (as reported to the GFA study on independent forest monitoring, October 2011) although this SOP is not in the public domain.  The GRA does not seem to have such an SOP, and as in the GFC there are an extraordinary number of points where apparently whimsical administrative decisions can be made to delay exports.  On what basis, for example, does the Enforce-ment Department decide that a container should be subject to a manual search rather than the radiation scanner?  Why should the damage and delay caused by such unloading and reloading be charged to the exporter if no fault is detected? – it is usually not reclaimable from business insurance.

It is a citizen’s right under Articles 146 and 149 (D) of the National Constitution 1980/2003 to have information about the procedures which the government agencies are applying with respect to his/her business. A major and widespread complaint against the GFC is its imposition of administrative penalties for minor mistakes. There is no public document which lists the eligible offences or the penalties. Article 31 of the Forests Act 1953/1997 allows the GFC ‘in substitution for any proceedings [= court prosecutions], [to] accept on behalf of the State a sum of money by way of compensation from any person reasonably suspected of a contravention of this Act not being an offence under section 24 [counterfeiting]: provided that — (a) such compensation shall be accepted only where the person reasonably suspected of such contravention has expressed his willingness in the prescribed form that the contravention as aforesaid shall be so dealt with, and where the prescribed royalty value of the forest produce or thing in respect of which contravention has taken place does not exceed two hundred and fifty dollars if the person accepting the compensation is a forest officer other than the Commissioner or seven hundred and fifty dollars where such person is the Minister or a member of the Commission or the Commissioner; [and] (b) such compensation shall not exceed five times the market value or alternatively, where the value of the forest produce or thing cannot be estimated, the sum of one hundred dollars.’

In practice, the GFC has for years been avoiding prosecutions so its allegations of offences have not been tested by cross-examination in open court.  And for what kinds of alleged offences?  Here are some examples from my informants:

*transcription error in the 9-character GFC timber tag;

*mistake in calculating the volume of timber in cubic metres;

*mistake in writing the GFC-designated name of the timber;

*transporting timber with a GFC removal permit one day expired by one day (although no expiry date is given on the standard forms for removal permit in the Fourth Schedule of the Forest Regulations 1953);

The GFC has been using this administrative procedure to impose penalties totalling millions of Guyana dollars; in other words, far in excess of the limits prescribed by the law quoted above.  The GFA report mentioned above notes several instances of the GFC trying to claim administrative discretion and exceptions for which there is no backing in law.

Both the GFC and GRA need to be hauled back into application of the rule of law and the application of publicly-available standard operating procedures, prohibiting the discretionary decision-making which is the bane of client citizens.  An early task for the relevant sectoral committees of the National Assembly would be to inquire into these abuses of authority.

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